Broker tips: On The Beach, Bellway
By Iain Gilbert
Date: Wednesday 16 Oct 2024
(Sharecast News) - Canaccord Genuity lowered its target price on packaged holidays business On The Beach from 220.0p to 187.0p following the group's recent trading update.
The Canadian bank stated On The Beach has seen its shares trade sideways for the last 12 months, which it believes could be reflected in the uncertainty around increasing levels of competition, with more airlines going direct-to-consumer, as the company has not seen any additional market share gains in value over the last seven years.
Furthermore, Canaccord reckons some uncertainty remains around the success of the business model moving towards long haul and premium and whether On The Beach can continue to win new customers within the new growth markets without significantly diluting its underlying earnings margin.
"However, the valuation remains very low, trading on a FY25E FCF yield of 13%, while the net cash balance sheet (average net cash £66.0m) gives the group optionality," said Canaccord, which reiterated its 'buy' rating on the stock and updated its FY24-25E estimates, increasing its FY24-25E EBITDA by 15% and 12%.
Analysts at Berenberg raised their target price on housebuilder Bellway from 2,900.0p to 3,200.0p on Wednesday following the group's FY24 earnings a day earlier.
Berenberg said Bellway, like its peer group, has experienced "a very challenging two-year period", with both a "significant decline" in customer demand, as well as "brutal margin erosion", with the group's FY24 pre-tax profits result down 65% from its peak two years ago.
However, Berenberg believes that the outlook from here was "clearly more optimistic" and said Bellway will participate in the steady, but not exuberant, recovery that it envisages across the wider housing market as it recovers the lost volumes and margin over a multi-year phase.
"With a lengthy landbank (relative to current build rates) and a solid enough balance sheet, we think that Bellway is well positioned to participate in the recovery," said the German bank, which reiterated its 'hold' rating on the stock.
However, despite the "attractive outlook", Berenberg noted that it still sees "more compelling" opportunities elsewhere in the sector.
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